Rand Slumps to 6-Month Low as Spain Concern Damps Risk Appetite

May 30 (Bloomberg) -- The rand fell to the lowest in six
months as Spain struggled to rescue its troubled banks and China
damped speculation of large-scale stimulus, hurting demand for
riskier assets.

South Africa’s currency depreciated 2.3 percent to 8.5050
per dollar as of 4:20 p.m. in Johannesburg, the weakest level
since Nov. 28 and the worst performance out of the 16 most-traded currencies monitored by Bloomberg. Yields on the nation’s
13.5 percent bonds due 2015 dropped one basis point, or 0.01
percentage point, to 6.40 percent.

The euro retreated to a two-year low against the dollar and
Spanish bond yields climbed after the country’s central bank
Governor, Miguel Angel Fernandez Ordonez, resigned a month early
amid criticism over the nationalization of Bankia group, the
nation’s third-largest lender. China has no plans to introduce
stimulus measures of the scale seen during the global financial
crisis, the official Xinhua News Agency said yesterday.

“The rand finally plays catch-up on the euro’s demise,”
Brigid Taylor, Johannesburg-based head of flow sales at Nedbank
Capital, unit of Nedbank Group Ltd., said in e-mailed comments.
“As risk appetite remains under pressure globally, we continue
to see massive pressure on local equities, lack of meaningful
support for bonds and rand deterioration.”

The Standard & Poor’s GSCI Index of raw materials slumped
to the lowest in almost eight months. South Africa’s benchmark
stock index retreated as much as 1.2 percent, led by commodity
exporters including Anglo American Plc and BHP Billiton Ltd.

Rand Decline

“With commodities falling, equities dipping and concerns
over Spain rising, it’s hard to see why the rand should remain
resilient,” John Cairns and Josina Solomons, Johannesburg-based
analysts at Rand Merchant Bank, said in e-mailed comments.

The South African currency’s three-month implied volatility
versus the dollar climbed to 19.5 percent today, the highest
since January, as options traders anticipate wider price swings
in coming weeks. The rand’s three-month implied volatility is
the highest out of 16 major currencies monitored by Bloomberg.

The rand extended its decline after data showed that South
African credit growth slowed last month, prompting investors to
pare bets on an interest-rate increase, easing pressure on the
central bank to lift interest rates from a 30-year low.

Private sector credit extension to households and
businesses rose 7.3 percent, compared with 9.2 percent growth in
March, the Pretoria-based Reserve Bank said on its website
today. The median estimate in a Bloomberg survey of 13
economists was for credit to expand 9 percent.

“We do not expect the MPC to change the repo rate this
year, considering the heightened uncertainty in the euro zone,”
Tebogo Mosepele, a Johannesburg-based analyst at Standard Bank
Group Ltd., said in e-mailed comments. “The current
accommodative monetary stance is appropriate, particularly given
that South Africa’s economic conditions are likely to remain
lacklustre this year.”

Forward-rate agreements declined as traders pared bets on
an interest-rate increase this year. Three-month forward-rate
agreements starting in February fell two basis points to 5.46
percent, the lowest since December.